Sidwell Strategies Week-in-Review CommodityBuzz: Expect election volatility in the week ahead

Its November market watchers! Hope you had a happy Halloween and remembered to turn your clocks back this morning! In some ways, its been a long year while in other ways, its moving fast. It seems like just yesterday that it was near 100 degrees with hot, heavy winds and yet weve just recovered from a week of freezing temperatures and record ice levels for October. All in all, we could have done without the ice especially for fall crops in the field, but on the other hand, it was timely to get the moisture none of which ran off the way it came. For winter wheat already planted, this moisture is ideal. For those yet to plant, it also brings confidence to go ahead and do so and I expect more wheat will be planted than was originally intended due to the moisture and new crop price levels on wheat that today can be locked in near $5.40 for 2021 cash wheat. The fundamentals and fund buying have been supporting this market. However, weather is becoming more favorable and fund liquidation has initiated. While only reporting numbers through Tuesday, the Commitment of Traders report released every Friday showed funds adding hefty longs in corn with only modest changes in wheat and beans. Tuesday was also the new recent high in corn with December reaching just above $4.22 before selling off to close the week at $3.98 . Im expecting next Fridays report will show a net fund position less long than this past weeks. The fund position is not the only Tuesday number well be paying attention to with the Presidential election finally here. Exchanges as well as clearing houses have increased margin requirements ahead of the election with volatility expected to increase with the outcome anything but certain. Speculation as to which candidates win will mean what for equities or commodities also has multiple outcomes given the relative uncertainty of the extent of change for tax and trade despite campaign rhetoric. With COVID cases reportedly picking up around the U.S. and the world, the threat of mass shutdowns is weighing on markets. Equities suffered a steep selloff this week resulting in Wall Streets worst one-week decline since March this year. No doubt positioning squaring to mark the end of the month and in preparation for the election played into this, but how much is hard to say. In the ag markets, fundamentally, some recent concerns have started to ease while demand has stayed fairly steady despite some slowdown in China buying. Mondays USDA crop progress and conditions report revealed the lowest winter wheat rating ever to start the season at 41 percent Good-to-Excellent. We must however put this into context given that early ratings have very little correlation to final yield. We know this all to well given the resilience of the crop and how the recent precip has since changed things significantly as will be reflected in tomorrow afternoons updated ratings. July 2021 KC wheat futures closed the week down nearly 30 cents. Late rains in Argentina have also stabilized the wheat crop there while USDA still remains higher with crop estimates versus the local Buenos Aires Grains Exchange. Further weakness is expected in this market ahead. The inside day on the charts Thursday followed by consolidation trading Friday is setting this market up for a move this next week. The corn market had an inside trading day on the chart Friday suggesting that we might see a move early next week either up or down. Export demand for corn remains firm with a major sale to Mexico this week and more expected to go to China. US corn basis remains firm and US origin is looking cheaper versus other origins while domestic prices in China continue to firm now around the $9.80 per bushel level. Such firmness could indeed help to support wheat although wheat has moved more than corn in recent months. December corn finished the week just below $4.00. The outcome of the Presidential election on Tuesday is expected to have a more immediate impact on energy markets, which is closely tied to corn demand through ethanol. Oil prices sold off this week and need to be watched in conjunction with trading the corn market. Soybeans also traded weaker this week as China buying pace slowed. A new recent high was put in on Tuesday at $10.88 on the January futures, which is now the front month and came back into line with November futures that were previously traded at a premium to the deferred month. The market lead this week was definitely the cattle markets with both feeder and live cattle contracts surging higher from recent lows. The moisture profile for wheat pasture will improve demand for stockers and threats of COVID shutdowns could create another run on retail beef. Overall, grains have been overbought and cattle have been oversold, which are starting to see reversal. October feeder cattle futures and options expired Thursday at $136.70 while October Fats expired Friday at $105.975. With December Fats closing above $108 on Friday, there is talk that $112 could be in the cards. Cheaper feed grains would help encourage this if we see further selloffs in that complex. As Ive addressed before, if you have or are selling calves here, consider adding long call options to participate on the upside should this market rebound. Give me a call at (580) 232-2272 or stop by our office to get your account set up and discuss strategies to protect your exposure to these markets. It is never too late to start and there is no operation too small to get a risk management and marketing plan in place. Remember, I am on-site at the Enid Livestock Market on Thursday, sale day. If youre needing seed wheat of any variety, be sure to call Sidwell Seed at (580) 874-2286. We have a wide variety of bulk and bagged seed including WestBred, Limagrain CoAXium, OGI/OSU, Agri-Pro and KWA with multiple pick up points in Kremlin, Goltry and in bags at 81 Feed and Seed in Enid and Medford with advance notice. Wishing everyone a successful trading week!

Brady Sidwell is a Series 3 Licensed Commodity Futures Broker and Principal of Sidwell Strategies. He can be reached at (580) 232-2272 or at brady@sidwellstrategies.com. Futures and Options trading involves the risk of loss and may not be suitable for all investors. Review full disclaimer at http://www.sidwellstrategies.com/disclaimer.